Can big budget cuts be environmentally friendly?

at 03:12 PM ET, 08/26/2011


(THE WASHINGTON POST)
The Heartland Institute isn’t a group most people would associate with saving the planet. This is, after all, the same organization that hosts an annual conference for climate skeptics and deniers of all stripes, invariably featuring keynote speaker James Inhofe. And yet, here they are, teaming up with lefty green groups such as Friends of the Earth and Public Citizen, as well as the conservative Taxpayers for Common Sense, on a new report for the Green Scissors campaign. The subtitle? “Cutting Wasteful and Environmentally Harmful Spending.”

The premise of the report is simple. The federal government funds a whole bunch of different programs that affect the natural world in a variety of ways. There are loan guarantees for wind turbines, sure, but there are also tax breaks for oil exploration, credits for corn ethanol, timber subsidies, crop supports, federal flood insurance, highway spending. Cutting all of these programs, the Green Scissors campaign contends, would save $380 billion or more over five years. What’s more — and this is the contentious part — the report argues that making these cuts “can help protect our natural resources.”

But can cutting the budget really help the environment? It’s worth breaking down the Green Scissors recommendations into a few different sections. The big-ticket item in the report is fossil-fuel subsidies — from a tax deduction for domestic oil and gas manufacturing to the depletion allowance to money for World Bank (which, the report notes, funds plenty of hulking new coal plants abroad).

Hacking most of these fossil-fuel subsidies and tax credits, the report notes, would save $61 billion over five years. (It’s difficult to price out every last piece of government support — for instance, the Oil Pollution Act of 1990 puts a cap on industry liability for offshore drilling, and the “cost” of that can fluctuate.) Note, though, that this probably wouldn’t have a huge effect on America’s fossil-fuel consumption: As Alan Krueger, then the chief economist at Treasury, estimated in 2009, junking most of these tax breaks would decrease domestic production of oil and gas by less than 0.5 percent. One could argue that those billions would be better spent elsewhere, but there likely wouldn’t be a huge environmental impact either way.

The Green Scissors campaign also proposes junking all subsidies for nuclear power, some $49.6 billion worth, over five years. Friends of the Earth and Public Citizen are no fans of nuclear power, but there’s a case to be made that greenhouse gas emissions might eventually go up if support for the nuclear industry vanished. Plus, as Stephen Lacey points out, there seems to be an accounting error in the report: Cutting the nuclear loan guarantee program would save just $225 million over five years, not the $22.5 billion that the report claims.

Environmentalists, meanwhile, probably won’t warm to the sections of the report that suggest doing away with most alternative-energy subsidies. Scrapping the ethanol credit is no longer terribly controversial among greens, given the mounting evidence that corn ethanol can be even worse for the planet than plain old gasoline. But what about loan guarantees for solar and wind, which have been critical for nursing both industries through infancy? (Note, however, that the campaign doesn’t propose eliminating renewable production tax credits.) It’s not as if solar and wind would suddenly flourish if all energy subsidies disappeared. And what about ARPA-E, the agency tasked with providing early-stage funding for advanced energy technology, modeled after DARPA in the Pentagon?

One of the more fascinating portions of the report deals with government subsidies that don’t get nearly as much attention for having an adverse impact on the environment. There’s $56 billion worth of farm subsidies and crop supports. There’s the Essential Air Service, which props up near-empty flights to smaller towns and cities. There are programs to allow timber companies access to public lands. There are multimillion-dollar projects overseen by the Army Corps of Engineers that end up depleting wetlands or promoting speculative development in ecologically sensitive areas. All of these programs, the report notes, deserve closer scrutiny.

All told, there’s a coherent broader theme here. Austerity is the hot ticket right now. Environmentalists might as well catch the fever and push to scrap spending programs that they believe do more harm than good. Even for liberals, not all spending is virtuous. That said, while Congress might agree on the broader point, the details are likely to look much different in practice. Oil subsidies, for instance, are difficult to repeal, while renewable tax credits are perpetually on shaky ground. It’s a lot easier to see ARPA-E targeted for elimination than, say, nuclear loan guarantees. A Republican House that took up the banner of eco-friendly austerity wouldn’t necessarily make the same cuts that Friends of the Earth would like to see.

 
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